Could Buying XRP Today Set You Up for Life?
Key Points
XRP made millions for investors who bought it at the perfect time in the past.
It isn't reasonable to expect similar returns going forward, nor to perfectly time the market.
The coin's investment thesis is now also under some additional pressure to play out.
Unfortunately, buying XRP (CRYPTO: XRP) today is unlikely to set anyone up for life, even though it did exactly that for some of its earlier buyers. From early 2017 to early 2018, the coin experienced a face-melting climb that was enough to turn a $1,000 stake into about $347,000.
Today's setup for XRP is very different from that period. Now, it needs to deliver on its ambitions to be a financial platform for institutional investors to experience its next major leg of growth. So far, that progress has been limited. Let's dive in and see why.
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The last life-changing run with this coin was in the distant past
For XRP to repeat its last huge run that created rich investors, its price would need to climb from $1.50 at the time of this writing to approximately $520.50 per coin, for a total market cap of $32.8 trillion. That's nearly 11 times the entire crypto market's value of about $3 trillion, and it's safe to say that even over the very long run, XRP will almost certainly not grow by that much, no matter what it does.
What's more, any new fortune from buying XRP today would have to be driven by growth stemming from its role in the real economy.
And as far as the balance of risk and reward goes, XRP looks a lot riskier and has somewhat less upside than in the past.
Is XRP winning the races it entered?
The XRP Ledger (XRPL) is trying to compete in tokenization (putting assets like stocks and bonds on a blockchain) and payments.
Its progress on those fronts is real, but limited. The XRPL has $499 million in freely transferable tokenized assets, a small sum compared with the segment's leader, Ethereum, which holds $16.7 billion in tokenized assets on its chain. XRP is still a competitor, and it might gain some inflows of those assets by virtue of its compliance features, which institutional investors need. But it isn't obvious that the network is positioned to be a leader in tokenization, and it probably won't be.
With payments, the story is similar. The XRPL hosts just $1.3 billion of the $305.7 billion in stablecoins in circulation, a share of 0.4%. Even Ripple, the coin's issuer and the ledger's main corporate backer, cites stablecoins, but not XRP, as settlement options for users of its payments product.
Worse yet, winning in stablecoins or tokenized assets wouldn't automatically deliver strong returns to holders. The XRPL destroys its tiny transaction fees, and the protocol has no buyback or fee-sharing mechanism to link network activity to higher XRP prices.
I owned XRP in the past and still hold shares of XRP exchange-traded funds (ETFs), but I'm not buying more. If the ledger's share of transferable tokenized assets or stablecoins climbs meaningfully over the next few quarters, I'd reconsider.
Until then, today's buyers shouldn't expect to win yesterday's fortunes with this coin.
Alex Carchidi has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum and XRP. The Motley Fool has a disclosure policy.